The Gazette 1993

VOL. 87 NO. 2

JULY/AUGUST 1993

Ground Rents: The Shape of Things To Come

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By: J.M.G. Sweeney*

with the European Convention of i Human Rights) which may inhibit our legislators. Furthermore, the omission of the topic from the agreed Pro- i gramme for a Partnership Government ; can hardly be regarded as accidental 5 . ' Subject to this, the writer ventures to believe that any future Act will follow closely the wording of the 1978 Act 6 which prevents the creation of new leases reserving ground rents on dwellings. It may be expected to vest in the tenant the fee simple (together j with all intermediate interests) in a dwelling the subject of every lease 7 made before the 16th day of May, ' 1978" if the tenant would, apart from Í this future Act, have the right, under the 1978 (No. 2) Act (including, of course, any future amendments), to enlarge his interest into a fee simple. Whatever form any future Act may take, it should, I think, be clear that the practical importance of ground j rents will continue if the following is considered: j ground rents on business premises. 2. In deciding whether a rent has been extinguished or not, i.e., whether it has vested automatically in the ' tenant or not, it will still be as j necessary as ever to refer to the j complicated statutory provisions and case law which today determine whether a tenant is entitled to acquire the fee simple or a reversionary lease. i 1. It was not proposed to abolish ; Accordingly, one of the aims of this article is to extract from this entangled subject some of the threshold or preliminary elements which should warn the practitioner of the presence of the kind of ground rent which entitles a tenant to acquire the freehold reversion or a reversionary lease. Even then, it will not be possible to scrutinize in a short article The Threshold Requirements

Failure to recognise an opportunity compulsorily to acquire the fee simple may expose a tenant's legal advisers to an action for professional negligence. Should the previous government's commitment to abolish domestic ground rents by January 1,1997 be persevered with, this will not reduce the practical importance of even ground rents on dwellings as it will remain always necessary to be able to identify what has been extinguished. This article examines some threshold requirements the presence of which should indicate to the practitioner the existence of the kind of ground rent which may entitle the tenant to acquire a reversionary lease or the freehold reversion. It also suggests some reforms. As a lease approaches its expiry date, the leaseholder will often be under considerable pressure to have him apply for a new lease for a term of, at most, 35 years and at virtually a market rent. If the rent of the lease which is about to expire is low, or if the length of the term suggests a building lease 1 , it will probably occur to the tenant's solicitor that the rent may in fact be a ground rent entitling | his client to apply for a 99 year reversionary lease at a fraction of the "new tenancy" rent or, better still, to acquire compulsorily the fee simple. However, it is by no means easy to determine whether such a right exists and the legal adviser may, quite wrongly, be persuaded that the tenant | is not entitled to anything more favourable than a 35 year tenancy at | what may prove to be a crushing rent. Such a decision on this question could be a serious mistake on the lawyer's The Professional Negligence Risk

Professor JMG Sweeney.

part resulting in grievous loss to his client for the recovery of which he might sue the practitioner. 2 But are not grounds rents to be done away with? On 19 November, 1991 1 in a reply to a parliamentary question, the then Minister for Justice, Mr. Ray Burke TD, stated that a very rough estimate made some years previously of the number of domestic ground rents which still existed was about 200,000 and quoted from the Programme for Government 4 which had then been recently published, as follows:- The Government is committed to introducing legislation which will abolish all remaining domestic ground rents as and from January 1, \ 1997. Under these proposals, all remaining such rents will be deemed no longer to exist, and the fee simple of the property will become the exclusive ownership of the householder. The legislation will shift the onus of completing the purchase of outstanding ground rents from the householder to the ground rent landlord. Payment of compensation to the ground rent landlord would continue to apply on a similar basis as at present If there is to be leglislation, what shape will it take? There are rumours of doubts concerning the constitutionality of these proposals (and, perhaps, even their compatibility

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